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What Is Referral Marketing?
It is the process of leveraging different referral sources such as partners, customers and influencers, to refer target buyers they have a relationship with to your product or service. With referral marketing software, companies can obtain personalized lead generation at scale through both direct and indirect channels.
Who are your potential referral sources?
A referral source can be anyone who interacts and has a relationship with your target buyer, including partners in your ecosystem, influencers of your target buyer and existing customers. The referral sources chart demonstrates some of the many different referral sources a company can utilize to drive revenue.
Within the referral channel, companies typically run multiple referral programs where each program is specialized for the needs of the referral source with appropriate messaging, content and incentives to motivate referrals.
These referral programs fall into three categories:
- Direct to Individuals Program
- To and Through Strategic Alliance Programs
- To and Through Partner Network Programs
Why Referral Marketing Works and How to Use It :
Referral marketing is anything but this. In fact, referrals are the cheapest and most effective form of marketing and shouldn’t be ignored. In its simplest form, referral marketing doesn’t cost a dime. All you need to do is provide a good customer experience and tell your clients to spread the word. That’s it. But that would be leaving a lot of referral marketing’s potential on the table.
This marketing works because people are twice as likely to listen to product recommendations from friends over other sources. What’s more is that people trust these recommendations more than any other source of information regarding that product.
Referral marketing has been a go to for startups with limited marketing budget. Etsy a peer-to-peer e-commerce website estimates that 90% of its growth is from word of mouth.